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In the Mexican town of Santa Cecilia, a young woman named Imelda marries a man who eventually leaves her and her daughter Coco to pursue a music career. When he never returns, Imelda banishes music from her family forever and starts a shoemaking business.

Many years later, Imelda's great-great-grandson, Miguel, now lives with the elderly Coco and their family, including Miguel's parents and his grandmother, who are also shoemakers. Despite his family's music ban, Miguel secretly idolizes the deceased musician Ernesto de la Cruz, and teaches himself to play guitar by watching Ernesto's old films. On the Day of the Dead, Miguel inadvertently bumps into the family ofrenda, breaking a frame containing a photo of Imelda and an infant Coco. He discovers a hidden section of the photograph shows his great-great-grandfather, whose head has been torn from the photo, holding Ernesto's famous guitar. Believing this proves Ernesto is his relative, Miguel tells his family he will become a musician.

After Miguel's grandmother destroys his guitar, Miguel breaks into Ernesto's mausoleum and takes Ernesto's guitar to use in a local talent competition. Once Miguel strums it, he becomes invisible to all living people. However, he can interact with his skeletal dead relatives, who are visiting from the Land of the Dead for the holiday. Taking him back with them, they learn that Imelda cannot visit, since Miguel inadvertently removed her photo from the ofrenda. Miguel also discovers that stealing Ernesto's guitar caused him to be cursed; he must have a family blessing to return to the Land of the Living before sunrise, or he will die. Imelda offers him a blessing on the condition he abandons music, but Miguel decides to seek Ernesto's blessing instead. He encounters a homeless skeleton named Héctor, who offers to help Miguel get to Ernesto, provided Miguel takes Héctor's photo to the Land of the Living and puts it on an ofrenda. Otherwise, Héctor will never get to visit his daughter, and will eventually disappear as one of the forgotten. Héctor helps Miguel enter a talent competition to win entry to Ernesto's mansion, but Miguel's family tracks him down, forcing him to flee again.

Miguel sneaks into the mansion, where a surprised Ernesto welcomes him as his descendant. Héctor arrives, again imploring Miguel to put up his photo. Ernesto and Héctor, who once performed together, begin to argue; Miguel learns that, when Héctor wanted to break up the act and return home, Ernesto, who could not write songs himself, poisoned Héctor and stole his guitar and songs, passing them off as his own. To protect his legacy, Ernesto seizes Héctor's photo, and has Miguel and Héctor thrown into a cenote pit. There, Miguel discovers that Coco's father, and Imelda's lost husband, is Héctor, not Ernesto.

Rescued by his family, Miguel reveals the truth about Héctor's death. Imelda and Héctor reconcile, and the family infiltrates Ernesto's concert to retrieve Héctor's photo. Ernesto's crimes are exposed to the audience, and Imelda's alebrije Pepita attacks Ernesto, causing a giant bell to fall on him. In the chaos, Héctor's photograph is lost. As the sun rises, Coco's memory of Héctor fades; Imelda and a fading Héctor quickly bless Miguel, who returns home.